FUTURES.

New Dow Futures Fizzle In Cbot Debut

July 24, 2000|By Mary Haffenberg, BridgeNews.

There was the ringing of the bell, smiles for photographs and the usual fanfare at the Chicago Board of Trade on Thursday that accompanies the launch of a new product. But at the close of the first session for the new Dow Jones transportation, composite and utility indices futures, a mere three contracts in each traded.

On the surface, the ingredients are in place for decent contracts: a reputable exchange, contract brand recognition and about 150 traders already in the pit trading Dow Jones industrial average futures since 1997. So far this year, the Dow has traded more than 2 million contracts.

And, after all, more than 12 million futures contracts on the Standard and Poor's 500 stock index have traded at the Chicago Mercantile Exchange this year, and Nasdaq 100 futures have a volume of more than 2.5 million.

But not all stock index futures are alike. The S&P 500 underlying index is a popular measure against which fund managers measure their performance. The Nasdaq stock index has been notoriously volatile.

The Dow Jones stock indices have neither of these going for them right now.

"In the S&P and Nasdaq [futures], there is more volume from fund managers hedging and from the performance of the underlying indices themselves, particularly the Nasdaq," said David Wienke, a vice president at Fuji Futures Inc.

In addition, the Merc has electronically traded miniature versions of the bigger contracts that have attracted droves of the trading public, whose appetites have been whetted in the stock markets.

Making matters worse is that the Board of Trade paid millions for the license fees for the Dow Jones contracts, then was embroiled in a legal battle with the Securities and Exchange Commission that it eventually won before being able to list the contracts.

But the Board of Trade is undeterred by the dismal debut of its new products.

"We're going to continue to expand product base, and we're committed to expanding the Dow Jones complex," said Eugene Mueller, director of marketing for financial products at the CBOT.

Mueller said he hoped that when the Dow Jones contracts were offered electronically at summer's end, , more investors would take notice. He also said that as more derivatives products based on stock and sector indices are introduced, more opportunities for hedging and risk management would open up.